NovaBay Pharmaceuticals (NBY)

Terminating Research Coverage 01-30-12

Terminating Research Coverage Due to Analyst in Transition

Download Full-3 Page Note with Important Disclosures: Morning Note 01-30-12 BMOD MRNA NBY ISR OCLS

We are terminating research coverage on Biomoda (BMOD), Marina Biotech (MRNA), NovaBay Pharmaceuticals (NBY), IsoRay (ISR) and Oculus Innovative Sciences (OCLS) due to analyst in transition and the resulting resource re-allocation. The most recent company reports with company specific disclosures can be accessed free of charge as shown in the table below: 

Download Full-3 Page Note with Important Disclosures: Morning Note 01-30-12 BMOD MRNA NBY ISR OCLS

NovaBay (NBY) Downgrade 11-14-11

Downgrading to Neutral on Trading Liquidity Risk
UCBE First 20 Patients Data Delayed to Q1 2012
Impetigo/EKC Trials Begin Q4/Q1-NeutroPhase H1’12

Download Full 27-Page Report with Important Disclosures: NBY Downgrade 11-14-11

1.) Lack of Trading Liquidity Increases Risk: The failed conjunctivitis trial and subsequent loss of the Alcon partnership combined with issuing 4.7M additional shares at $1.11 has resulted in a significant loss of investor confidence and interest. NovaBay trading volume has decreased >50% over the past 3 months and >80% over the past 6 months resulting in only 15K shares of daily volume with a share price close to $1.00. The increased risk of only $15K per day in liquidity for a $30M market cap company has resulted in an increase from our previous 55% risk discount rate to 60% in our model.

2.) Reducing Rating to Neutral: Despite several potential catalysts in 2012 such as UCBE and Impetigo Phase II data (see below), we believe the time and/or cost of the required registration trials will probably mute investor enthusiasm for NovaBay shares until both investor confidence and interest return. We further note that NovaBay’s planned H1 2012 re-launch of FDA 510(k)-cleared NeutroPhase® for wound care carries first-year partner sales execution risk as well as adoption risk in the crowded wound care space. Therefore, we are reducing our recommendation to a Neutral rating with a 12 month Price Target of $1.25 based on a 30x multiple on projected 2014 earnings now discounted 60% (from 55%) to adjust for risk.

3.) UCBE Data Delayed to Q1’12: NovaBay is currently conducting a Phase II clinical trial for Urinary Catheter Blockage and Encrustation (UCBE) in quadriplegic spinal cord injury patients. NovaBay now expects results for the first 20 patients (Part A) to be available in Q1 2012 with another 20 patient Part B study using a different formulation of NVC-422 expected to have results available in Q1’12. (see Phase II Clinical Trial for Urinary Catheter Blockage and Encrustation UCBE)

4.) Impetigo Trial to Begin: On July 21, 2010 NovaBay announced positive data from their Phase IIa proof-of-concept trial of NVC-422 gel for the treatment of the highly contagious skin infection impetigo. Investors should note that there was a 100% response rate for the 10 patients infected with MRSA who completed treatment and there were no recurrences of infections. NovaBay partner Galderma SA is expected to initiate a multi-country 400-patient Phase IIb clinical trial in Q4’11 with data expected in H2’12. (see Results of Phase IIa Proof-of-Concept Trial for Impetigo)

5.) EKC Program: Although the adenoviral conjunctivitis trial failed, in the 38% of patients with adenovirus serotypes 8, 19, and 37, indicating Epidemic Keratoconjunctivitis (EKC) infection, a post-hoc efficacy analysis suggested a positive effect on sustained clearing of blurred vision in all patients treated with NVC-422 versus placebo. While, these finding require a larger, prospective Phase II clinical trial, we believe that NVC-422 may be more active in the cornea resulting in benefit for EKC patients. We believe that NovaBay will begin Phase II trials in Q1 2012. (see NovaBay Phase II Results for EKC Subgroup)

6.) NeutroPhase® Launching in H1 2012: NovaBay’s NeutroPhase® is an FDA 510(k)-cleared solution containing HOCI (hypochlorous acid) which is rapid-acting but short-lived making it ideal for multiple applications, especially in surface wound care. NeutroPhase has begun FDA validation manufacturing and is expected to be available for sale in H1 2012. NovaBay is currently seeking a commercial partner for NeutroPhase to cover the North American, European and Japanese markets for patients suffering from chronic non-healing wounds such as diabetic, pressure, and venous stasis ulcers.

Download Full 27-Page Report with Important Disclosures: NBY Downgrade 11-14-11

NovaBay (NBY) Update 08-15-11

UCBE First 20 Patients Data Expected in Q4
Impetigo and EKC Trials Expected to Begin Q4/Q1
NeutroPhase® United States Launch Expected 2012

Download Full 25-Page Update with Important Disclosures: NBY Update 08-15-11

1.) UCBE Data Expected Q4’11: NovaBay is currently conducting a Phase II clinical trial for Urinary Catheter Blockage and Encrustation (UCBE) in quadriplegic spinal cord injury patients. NovaBay expects results for the first 20 patients (Part A) to be available in Q4 2011 with another 20 patient Part B study using a different formulation of NVC-422 expected to have results available in H1’12. (see Phase II Clinical Trial for Urinary Catheter Blockage and Encrustation UCBE)

2.) Impetigo Trial to Begin: On July 21, 2010 NovaBay announced positive data from their Phase IIa proof-of-concept trial of NVC-422 gel for the treatment of the highly contagious skin infection impetigo. Investors should note that there was a 100% response rate for the 10 patients infected with MRSA who completed treatment and there were no recurrences of infections. NovaBay partner Galderma SA is expected to initiate a multi-country 400-patient Phase IIb clinical trial in Q4’11 with data expected in H2’12. (see Results of Phase IIa Proof-of-Concept Trial for Impetigo)

3.) EKC Program: Although the adenoviral conjunctivitis trial failed, in the 38% of patients with adenovirus serotypes 8, 19, and 37, indicating Epidemic Keratoconjunctivitis (EKC) infection, a post-hoc efficacy analysis suggested a positive effect on sustained clearing of blurred vision in all patients treated with NVC-422 versus placebo. While, these finding require a larger, prospective Phase II clinical trial, we believe that NVC-422 may be more active in the cornea resulting in benefit for EKC patients. We believe that NovaBay will begin Phase II trials, possibly in India and other countries, in Q1 2012. (see NovaBay Phase II Results for EKC Subgroup)

4.) NeutroPhase® Launching in 2012: NovaBay’s NeutroPhase® is an FDA-cleared solution containing HOCI (hypochlorous acid) which is rapid-acting but short-lived making it ideal for multiple applications, especially in surface wound care. NeutroPhase is expected to begin FDA validated manufacturing during 2011 and available for sale in 2012. NovaBay is currently seeking a commercial partner for NeutroPhase to cover the North American, European and Japanese markets for patients suffering from chronic non-healing wounds such as diabetic, pressure, and venous stasis ulcers.

5.) NovaBay Raises Additional Funds: On July 5, 2011, NovaBay raised $5.2M in gross proceeds by issuing 4,650,675 units through a registered direct offering consisting of one share of common stock and one warrant to purchase 0.75 of a share of common stock (3,488,005 shares), at a purchase price of $1.11 per unit. The 5-year warrants are exercisable after 180 days $1.33 per share. (see Recent Financing Activity)

6.) Summary: NovaBay has recently faced setbacks in their ocular program and their corresponding partnership with Alcon. While the data from the adenoviral conjunctivitis trial missed the endpoint, promising cornea data in a subset of patients with EKC provides a path forward. However, this significantly delays the original ocular program by 12 to 18 months. The loss of the Alcon partnership (now Novartis NYSE:NVS) was a combination of the missed endpoint as well as corporate restructuring of Alcon resulting from their acquisition by Novartis. The loss of Alcon’s financial support, mitigated by the $3M termination payment, required NovaBay to raise addition funds of $5.2M at an inopportune time. However, NovaBay continues forward in multiple indications and Aganocide formulations resulting in multiple shots on goal. We are maintaining our Strong Speculative Buy rating with a 12-18 month Price Target of $2.50 based on a 30x multiple on projected 2014 earnings discounted 55% to adjust for risk. We continue to believe NovaBay represents a promising biotechnology company whose Aganocide® compounds are proprietary, synthetic N-chlorinated antimicrobial molecules that mimic the human body’s natural antimicrobial defenses generated within neutrophils (white blood cells). Aganocides® appear effective against bacterial, viral, fungal and biofilm targets without generating new, drug-resistant strains.

Download Full 25-Page Update with Important Disclosures: NBY Update 08-15-11

NovaBay (NBY) Update 07-11-11

NovaBay Issues Business Update and Milestones
UCBE First 20 Patients Data Expected in Q4
New Impetigo and EKC Trials to Begin Q4/Q1

Download Full Report with Important Disclosures: NBY Update 07-11-11

1.) UCBE Data Expected Q4’11: NovaBay is currently conducting a Phase II clinical trial for Urinary Catheter Blockage and Encrustation (UCBE) in quadriplegic spinal cord injury patients. NovaBay expects results for the first 20 patients (Part A) to be available in Q4 2011 with another 20 patient Part B study using a different formulation of NVC-422 expected to have results available in H1’12. (see Phase II Clinical Trial for Urinary Catheter Blockage and Encrustation UCBE)

2.) Impetigo Trial to Begin: On July 21, 2010 NovaBay announced positive data from their Phase IIa proof-of-concept trial of NVC-422 gel for the treatment of the highly contagious skin infection impetigo. Investors should note that there was a 100% response rate for the 10 patients infected with MRSA who completed treatment and there were no recurrences of infections. NovaBay partner Galderma SA will initiate a multi-country 400-patient Phase IIb clinical trial in Q4’11 with data expected in H2’12. (see Results of Phase IIa Proof-of-Concept Trial for Impetigo)

3.) New Focus on EKC: Although the adenoviral conjunctivitis trial failed, in the 38% of patients with adenovirus serotypes 8, 19, and 37, indicating Epidemic Keratoconjunctivitis (EKC) infection, a post-hoc efficacy analysis suggested a positive effect on sustained clearing of blurred vision in all patients treated with NVC-422 versus placebo. While, these finding require a larger, prospective Phase II clinical trial, we believe that NVC-422 may be more active in the cornea resulting in benefit for EKC patients. We believe that NovaBay will begin Phase II trials, possibly in India and other countries, in Q1 2012. (see NovaBay Phase II Results for EKC Subgroup)

4.) NeutroPhase® Launching in 2012: NovaBay’s NeutroPhase® is an FDA-cleared solution containing HOCI (hypochlorous acid) which is rapid-acting but short-lived making it ideal for multiple applications, especially in surface wound care. NeutroPhase is expected to begin FDA validated manufacturing during 2011 and available for sale in 2012. NovaBay is currently seeking a commercial partner for NeutroPhase to cover the North American, European and Japanese markets for patients suffering from chronic non-healing wounds such as diabetic, pressure, and venous stasis ulcers.

5.) NovaBay Raises Additional Funds: On July 5, 2011, NovaBay raised $5.2M in gross proceeds by issuing 4,650,675 units through a registered direct offering consisting of one share of common stock and one warrant to purchase 0.75 of a share of common stock (3,488,005 shares), at a purchase price of $1.11 per unit. The 5-year warrants are exercisable after 180 days $1.33 per share. (see Recent Financing Activity)

6.) Summary: NovaBay has recently faced setbacks in their ocular program and their corresponding partnership with Alcon. While the data from the adenoviral conjunctivitis trial missed the endpoint, promising cornea data in a subset of patients with EKC provides a path forward. However, this significantly delays the original ocular program by 12 to 18 months. The loss of the Alcon partnership (now Novartis NYSE:NVS) was a combination of the missed endpoint as well as corporate restructuring of Alcon resulting from their acquisition by Novartis. The loss of Alcon’s financial support, mitigated by the $3M termination payment, required NovaBay to raise addition funds of $5.2M at an inopportune time. However, NovaBay continues forward in multiple indications and Aganocide formulations resulting in multiple shots on goal. We are maintaining our Strong Speculative Buy rating with a 12-18 month Price Target of $2.50 based on a 30x multiple on projected 2014 earnings discounted 55% to adjust for risk. We continue to believe NovaBay represents a promising biotechnology company whose Aganocide® compounds are proprietary, synthetic N-chlorinated antimicrobial molecules that mimic the human body’s natural antimicrobial defenses generated within neutrophils (white blood cells). Aganocides® appear effective against bacterial, viral, fungal and biofilm targets without generating new, drug-resistant strains.

Download Full Report with Important Disclosures: NBY Update 07-11-11

NovaBay (NBY) Update 07-07-11

Ocular Program Delayed while Alcon Terminates
Reducing Price Target While NovaBay Refocuses
UCBE and Impetigo Phase II Data Expected Q4/Q1 

Download Full Report with Important Disclosures: NBY Update 07-07-11

1.) Adenoviral Conjunctivitis Misses Endpoint: On May 18, 2011, NovaBay’s NVC-422 adenoviral conjunctivitis trial failed to meet the primary endpoint of sustained microbiological success of 20% over placebo on day 5 and day 7. In 81 evaluable patients, 10 in the NVC-422 group and 8 in the placebo group met the endpoint at Day 5 while 20 in the NVC-422 group and 19 in the placebo group at Day 7. The difference was not statistically significant at either day.

2.) Alcon Terminates Collaboration: On June 16, 2011, NovaBay announced that Alcon (now Novartis NYSE:NVS) terminated their collaboration agreement for NovaBay’s Aganocide compounds. Alcon will pay to NovaBay a total of $2,972,245 (which includes a $2,000,000 penalty for not progressing with the ear and sinus indications). All rights will revert back to NovaBay for all ophthalmic, ear, and sinus indications. In addition, all FDA regulatory filings made by Alcon will be transferred to NovaBay. Investors should note that NovaBay had received $6M from Alcon during 2010 and $2.1M through May 31 2011. (see Partnerships)

3.) New Focus on EKC: Although the adenoviral conjunctivitis trial failed, in the 38% of patients with adenovirus serotypes 8, 19, and 37, indicating Epidemic Keratoconjunctivitis (EKC) infection, a post-hoc efficacy analysis suggested a positive effect on sustained clearing of blurred vision in all patients treated with NVC-422 versus placebo. While, these finding require a larger, prospective Phase II clinical trial, we believe that NVC-422 may be more active in the cornea resulting in benefit for EKC patients. We believe that NovaBay will begin Phase II trials, possibly in India, in Q1 2012. (see NovaBay Phase II Results for EKC Subgroup)

4.) NovaBay Raises Additional Funds: On July 5, 2011, NovaBay raised $5.2M in gross proceeds by issuing 4,650,675 units through a registered direct offering consisting of one share of common stock and one warrant to purchase 0.75 of a share of common stock (3,488,005 shares), at a purchase price of $1.11 per unit. The 5-year warrants are exercisable after 180 days $1.33 per share. (see Recent Financing Activity)

5.) UCBE Data Expected Q4’11: NovaBay is currently conducting a Phase II clinical trial for Urinary Catheter Blockage and Encrustation (UCBE) in quadriplegic spinal cord injury patients. The trial is expected to complete in Q3 with results available in Q4 2011 with plans to initiate a Phase III registration study in 2012. (see Phase II Clinical Trial for Urinary Catheter Blockage and Encrustation UCBE)

6.) Impetigo Data Expected Q1’12: On July 21, 2010 NovaBay announced positive data from their Phase IIa proof-of-concept trial of NVC-422 gel for the treatment of the highly contagious skin infection impetigo. Investors should note that there was a 100% response rate for the 10 patients infected with MRSA who completed treatment and there were no recurrences of infections. NovaBay partner Galderma SA will begin a Phase IIb trial soon with results expected in Q4 2011 with the potential for Phase III clinical trials during 2012. (see Results of Phase IIa Proof-of-Concept Trial for Impetigo)

7.) NeutroPhase® Launching in 2012: NovaBay’s NeutroPhase® is an FDA-cleared solution containing HOCI (hypochlorous acid) which is rapid-acting but short-lived making it ideal for multiple applications, especially in surface wound care. NeutroPhase is expected to begin FDA validated manufacturing during 2011 and available for sale in 2012. NovaBay is currently seeking a commercial partner for NeutroPhase to cover the North American, European and Japanese markets for patients suffering from chronic non-healing wounds such as diabetic, pressure, and venous stasis ulcers.

8.) Summary: NovaBay has recently faced setbacks in their ocular program and their corresponding partnership with Alcon. While the data from the adenoviral conjunctivitis trial missed the endpoint, promising cornea data in a subset of patients with EKC provides a path forward. However, this significantly delays the original ocular program by 12 to 18 months. The loss of the Alcon partnership (now Novartis NYSE:NVS) was a combination of the missed endpoint as well as corporate restructuring of Alcon resulting from their acquisition by Novartis. The loss of Alcon’s financial support, mitigated by the $3M termination payment, required NovaBay to raise addition funds of $5.2M at an inopportune time resulting in shareholder dilution exceeding our model. As a result of these factors, we are maintaining our Strong Speculative Buy rating but reducing our 12-18 month Price Target to $2.50 (from $4.50) based on a 30x multiple on projected 2014 earnings and discounted 55% (from 50%) to adjust for risk. We continue to believe NovaBay represents a promising biotechnology company whose Aganocide® compounds are proprietary, synthetic N-chlorinated antimicrobial molecules that mimic the human body’s natural antimicrobial defenses generated within neutrophils (white blood cells). Aganocides® appear effective against bacterial, viral, fungal and biofilm targets without generating new, drug-resistant strains.

Download Full Report with Important Disclosures: NBY Update 07-07-11

 

 

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